tv Nightly Business Report PBS February 27, 2013 6:30pm-7:00pm PST
captioning sponsored by wpbt >> this is n.b.r. >> tom: good evening. i'm tom hudson. susie is off tonight. wall street's rally extends to a second day, erasing much of the week's losses and pushing the dow to a five year high. helping the markets higher were more commitments by the federal reserve to keep doing what its doing, until the economy improves. but a sour day for apple shareholders, as c.e.o. tim cook sheds little light on how the company plans to use its hoard of cash. that and more tonight on "n.b.r."! for the second day in a row, federal reserve chairman ben bernanke told congress the central bank is not about to change its strategy, and for a second day, a strong rally on wall street.
the dow surged 175 points to a five year high, the nasdaq added 32, the s&p was up 19 points. investors and traders warmed to the federal reserve chairman's steadfast support of the central bank's bond buying spree, he thinks the asset purchases are necessary to keep interest rates low in order to spur growth and boost hiring. the fed has been buying $85 billion a month in american i.o.u.'s since last september. while it won't stop the strategy, it will soon start talking about how to stop. >> we haven't done a new review of the exit strategy yet. i think we will have to do that sometime soon. even if we don't sell any securities, it doesn't mean that our balance sheet is going to be large for many years, it just would be maybe an extra year, that's all it would take to get down to a more normal size.
>> tom: other factors at play on wall street today included, an auction of italian bonds was well received, fending off new worries about the european debt crisis. and here in the u.s., january durable goods orders rose almost 2%, for their largest gain in over a year, and well above expectations for a modest 0.2% gain. the stock market got no help today from technology giant apple, apple shares slipped about one percent after investors were disappointed nothing concrete came out of the company's annual shareholder meeting. no word on a stock split, new product or most of all what apple plans to do with all its cash. suzanne pratt reports. >> reporter: "a" is for apple, and it turns apple is for cash, and holding on to lots of it. despite ample pressure from investors, c.e.o. tim cook still has no concrete plans for the company's $137 billion war chest. at apple's annual shareholder meeting today, cook said the
company's board remained in quote very, very active discussions about options for cash sharing. some apple experts say the tech giant is more likely to divulge those options some time in march. >> i think they can modestly raise the dividend and modestly increase the buyback without doing anything special any other sort of financing things like that. what investors are looking for is a way to use that $100 a share in cash and getting it back to the u.s. for more dividends and more buybacks. >> reporter: the push for apple to share some of its wealth has accelerated this year, as the stock once a market darling lost a lot of its shine. after hitting a high of about $700 a share in september, it now trades in the mid $400s. this year alone the stock has slide 17%, as the broader market has rallied. but hoarding cash isn't apple's only problem. there's been a growing perception on wall street that
apple's growth prospects are dwindling. that's as competition heats up for smartphones and tablets. still, while apple may be in a rut, most believe it's got a long pipeline. >> we do think there's still innovation at the company. we think there will be new iphones, new ipads, probably an apple tv at some point and potentially even an iwatch. and, all those things would be catalysts for the stock and those are the biggest growth drivers. >> reporter: it may however be a while before apple launches a new product, or makes a big move with its cash. as a result, apple investors shouldn't be surprised if the stock remains in a trading range. suzanne pratt, "n.b.r.," new york. >> tom: in the past five months, apple's stock is down almost 40%. in the past week, oil prices have fallen 5%. when you see moves like these, is not uncommon to hear complaints about speculators driving prices, fueling volatility and scaring off investors. what is the difference?
robert hager joins us tonight from the nasdaq. robert, you have taken on this yourself, trying to figure out the difference between investment and speculation. why is this distinction employed? >> well, i think a lot of the problems, tom, that investors are having is the confusion over what is an investing and speculation. let me say i'm being supported and so many ways by the c.f.a. institute, which is hosting a global blog debate that is going to allow people to weigh in on their thoughts about exactly what is investing and what is speculation, and the hope is we're going to end up with a definition one of these days. >> tom: isn't it partly defined by your time horizon, with hyperactivity trading nano second trade, clearly speculation. maybe investment begins at one week, one month, one year? >> tom, i think time horizon is definitely part of this. and jack hogel has spoken to this at length. if we were to do a
demarcation line, to the right would be the longer horizon, which would be investing. once we get into the definition, we have to next have to look at strategies, what strategies are relevant to speculation, and what strategies are relevant to investing. i think people may be using speculative strategies and unwittingly think they're investing. >> tom: maybe this will help. the commodities futures regulating defines a speculator, and says a speculator trades with the object of achieving profits through the successful anticipation of price movements. but don't investors do the same thing? >> well, you sent that to me earlier today to think about it, and that's exactly what i thought. at first it really smacked of speculation because speculators are so focused on price. price first, and then they might think about the asset later. but they're obsessed with changing stock price. so that made a lot of sense. but your point is
well-taken, tom. investors care about price, too, but i think they care about it on a secondary level. they're most interested, i think, on the asset. what is the asset worth, the enterprise value worth. let's figure that part out first. and then we'll worry about the price later. so i think it is a secondary issue for investors, and a primary condition for speculators. >> tom: you agree, regardless of speculator are investor, the goal is to make a profit? >> absolutely. and let's make one thing clear. this exercise is not meant to demon icize speculation. the market needs speculation. and there is something called intelligent speculation, and we're going to get to the bottom of that. and it pre-suspicious there is probable unintelligible speculation and investing, and we need to figure that out as well. >> tom: you mentioned your blog, in which you hope to spark this public conversation. and we have a link to this
blog, and it's on our website. you can look at for it as nbr.com. it is a tough discussion. with us is robert hagstrom, with legg mason investment accounts. still ahead, corporate logos are the calling cards seen round the world for corporations. but what happens when those copyrighted designs are turned into art? friday is when the government spending cuts known as the sequester are due to take effect. friday is also when congressional leaders gather with the president to see if they can come up with some alternatives to the cuts. given the last-minute nature of the meeting, hopes are low for a solution, though some potential solutions are being kicked around. darren gersh reports. >> reporter: whenever they can, republicans point out the sequester cuts add up to about a 2% trim to federal spending. that's why many conservatives say the white house is over- hyping the fall out. and some senate republicans
think it would be a good idea to replace the across the board cuts with trims that the president himself picks out. though some conservatives fear that would give the white house too much control. >> i understand those concerns, but let's be clear about the goal here. the goal isn't to hand over congressional authority, it's to make sure these cuts actually happen. and that we don't cut a penny less than we promised the american people we would cut a year and a half ago. >> reporter: the white house position shows no sign of changing, the president insists some tax increases must offset some of the sequester spending cuts. if anything, the white house is actively ratcheting up the pressure. the secretary of education today warned the sequester would eventually cost teachers their jobs, though that might not happen until the next school year begins. >> i can't tell you how troubling that is to me and frankly how angry it makes me feel. in my world, graduation rates are up a little bit.
again, we're nowhere near where we need to be. we need to build on that momentum, not taking a step backwards. >> reporter: even if republicans were willing to give the president full authority to pick the cuts he wants, the white house would be unlikely to accept that sequester solution. >> i think the president would be crazy to concede the republican demand for never again any tax increases. >> reporter: so what happens next? the betting is there will be another messy washington compromise. >> my guess is that they agree on a sequester light. that they'll do some shuffling that they'll probably withdraw some of the sequester. perhaps they'll make some modest concessions on revenue. i mean, i know the republicans are really digging in their heels there, but they might make some modest concessions there. so we'll probably see some of the sequester, but not everything that's in law right now. >> reporter: oh, by the way, if the president and congress find a way past the sequester at their meeting on friday, they'll
face another crisis on march 27th when funding for much of the government is scheduled to run out. darren gersh, "n.b.r.," washington. >> tom: while lawmakers couldn't agree on a solution to the sequester, they did finally agree on something else late today: who will next lead the treasury. jack lew was confirmed as the next u.s. treasury secretary just a while ago, by a senate vote. >> tom: it's more bad news from j.c. penney. after the bell it posted fourth quarter results, coming in well below expectations. penney's lost $1.95 a share in
the last three months of 2012, it was far worse than the $0.18 per share loss analysts had forecast. over the last year, the stock has lost about half of its value, it fell below falling below $20 a share in after hours trading. >> reporter: well, you can't say >> reporter: well, you can't say j.c. penney c.e.o. ron johnson isn't trying new things, he's rolled out a series of changes to help revive the company since making the leap from apple to penneys in late 2011. first was a change to price strategy, going for "every day" value pricing, instead of sales and coupons, in an effort to keep it simple for shoppers, but today it announced it's starting weekly sales. then, store re-designs, setting up mini stores within a store, featuring shops from levi's denim, liz claiborne, and izod. but in spite of those efforts, penney's has cut more than 1,200 jobs over the last year and it's stock price has been cut in half. so what is the company going to do about it?
here's c.e.o. ron johnson on the earnings call. >> in one month, every employee will carry an ipod and be able to check out costumers any time and anywhere in the store. last week, 25% of all transactions were conducted on a mobile device. this quarter we'll start to see product information, training, and all of our employee support systems directly to employees, to our instore to networks on these ipods. >> penney's is also in the midst of a legal battle. macy's, over who has the rights to sell martha stewart home products like bedding and cookware. penney's bought 17% of her company. johnson says he expects its home department to help get its company in the black. ron johnson is expected to take the witness stand on friday. allison worrell, "n.b.r.," miami.
>> tom: jessica bornn is with us tonight in new york. before we talk about all that is wrong at j.c. penney, is j.c. penney doing anything right? >> well, we saw them in february resort to a more promotional stance, which they said they wouldn't do. this is the first month they've done it, and we've seen them bring back clearance and put signage on top of their fixtures. that is a step in the right direction, however, it has only been one month. it is still too early to tell what kind of impact it will have on the sales going forward. >> tom: that's exactly the kind of thing that ron johnson tried to move away from back in the fall of 2011. as they revert back to that, what is the j.c. penney brand today? >> today the brand is basically startly from scratch. they alienated their core customer, it's customer who wanted value and the coucoupon or who wanted to come into the store and see a sale. they basically said we
don't want you anymore. they've had to really work hard to get that customer back in the store. we don't believe the fashion in the store is that compelling. it is something you can find elsewhere in the mall. and that customer really doesn't want to shop there, so they have chosen to go to another retailers. >> tom: and it is not only in-store costumers that are fleeing j.c. penney. year-over-year, when it reported its fourth quarter numbers, that j.c. penney's total sales down 25%, and internet sales 23%, and that is a key part for any growth strategy for retailers. >> it is. and the trend is towards econsumers', and any retailer is doing as much as they can to capture their costumers three any type of mobile app or any ecommerce app that they can. but the fact of the matter is their customer left and the customer is not looking to buy from them
online. >> tom: ron johnson is the guy at the top. he took back over in 2011, and since then the share price of j.c. penney is down 20%. so what does he have to do now? >> i think he -- especially after this month's recent quarter, he really has lost some of the faith that wall street had in him. i think he has a short window of time to really show these new changes he is affecting, bringing it back to the sales and the clearance and promotional activity, he needs to show in short order this is making a difference, and j.c. penney can comp positively. but until any of the wall street investors see that, they're going to stay away. >> tom: do they need to imitate any store with a strategy or does it need to strike its own cord? >> i think ron johnson wanted to go out and strike his own chord and rebrand j.c. penney. we don't believe anything in the store is different from anything you can find in the mall. they're struggling to differendifferentiate themselves
in a different way. >> tom: we'll leave it there. j.c. penney with jessica bornn, an annual with merchant forecast. >> tom: a nice rally on wall street erased the losses we saw earlier in the week. the s&p 500 saw steady buying interest, rising 1.3% by the closing bell. the dow jones industrial average broke out above 14,000 to close at it's highest level since october 2007. trading volume was lighter with
673 million shares on the big board. 1.7 billion traded on the nasdaq. there was broad based buying. the sector gains were led by the industrial, material and financial sectors, each up by at least 1.6%. leading the financial sector, and the dow industrial index was j.p. morgan, rallying three and a half percent a day after investor meeting. shares closed just below a multi-year high. the bank announced plans yesterday to cut 17,000 jobs by the end of next year to reduce expenses by $1 billion. mining equipment make joy global doesn't think stronger demand for coal, copper and iron ore will help its sales in the short term. but despite flat sales, its latest quarterly results were better than anticipated. shares rallied 5.8% as company executive said they see encouraging signs of improving commodity markets. the company has been cutting costs to help its margins in the face of slowing sales.
we have reported recently on the urge to merge this year, including a number of retailers on the market for buyers. one of those rumored today was hangbag seller coach. rumors move markets, and coach shares gained 2.8% on twice its average daily volume. there was no comment from the company. coach shares remain well below where they were trading before reporting slower profit and sales growth in january. despite concerns about higher payroll taxes, and higher gas prices eating into consumer wallets, restaurant company brinker international is expanding. it plans on opening about one chili's bar and grill per month, after not opening any new restaurants over the past four years. shares of brinker rallied 4.6% with the firm focused again on growth. the company held its annual investor day today, acknowledging the casual dining business is under pressure, but it wants to double its earnings per share by 2017. discount retailer dollar tree is benefiting from those same forces on consumers. earnings were up 20% from last
year, and better than expected. stores saw shoppers spend more per store visit last quarter. the stock jumped 10.5%. volume more than tripled with shares finishing above $45 for the first time since october. other deep discount retailers benefited from dollar tree's strength. dollar general gained 3.6%. family dollar was up 2.5%. four of the five most actively traded exchange traded products were up. with such a strong overall stock rally, the short term s&p volatility note fell 6.7%. and that's tonight's "market focus."
>> tom: corporations dream of creating a logo that is recognized the world over, but the more well-known a brand, the more likely its logo is to be copied. ruben ramirez takes look at the use of corporate logos in art. >> reporter: the iconic apple. nike's swoosh and mcdonald's golden arches are global brands with a global following. >> these brands aspire to be globally famous but the downside of global fame is being bitten. >> reporter: being bitten, says susan scafadi of the fordham fashion law institute is when a brand's symbol is parodied or used in art. >> sometimes its a cultural commentary, sometimes its a political commentary, sometimes its just out of love. people really identify with brands. >> reporter: but for companies who spend billions cultivating a certain image, art can feel like an infringement. david de buck of the de buck gallery says this piece begs the question, what came first art or
fashion. >> the company louis vuitton has a particular logo. however, that logo was created off the monogram of a very famous artist called leonardo da vinci. >> reporter: artists like zeus incorporate logos in their work. >> what you wear is who you are, is what his critique is. so it's not an attack on the brand. it's what they do to us. how they impact us. >> reporter: but, logos aren't just for art that's hanging on the wall. >> designers are kind of co- opting that tattoo cool and making temporary tattoos that go with their brand that makes sense because tattoos fit the body. they're a form of adornment just like fashion. >> reporter: marisa kakoulas says for big brands, its not so much about fighting people who
want a polo pony on their chest or a gucci logo on their face. more of it comes down to who owns the tattoo, and if the person that gets it uses it in a commercial way to make money. think back to mike tyson's tattoo which ends up on ed helms face in the hangover 2. >> its when you take mike tyson tattoo and use it specifically in another context. in another medium and that's where people can get in trouble. for the most part, attorneys say there's a clear litmus test. >> if you fall on the side of creating a product. the chanel condom. the louis vuitton waffle iron. the other t-shirts that are out there, then you are more likely to fall on the wrong side of the law than if you're creating a single piece of art. >> reporter: while brands worry about diluting their image, art watchers say artistic works may actually raise brand awareness. >> these are high end pieces. i mean these pieces go into beautiful collections of people who can also actually afford the brands products so in that way there's a good association. >> reporter: and that association could actually boost sales for both the artist and the brands. ruben ramirez, "n.b.r.," new york.
>> tom: tomorrow on "n.b.r." the countdown is on to friday's sequester deadline, we'll see if lawmakers can cut a last minute deal to avoid billions of dollars in federal spending cuts. and we'll see the latest gauge of the u.s. economy, with the latest g.d.p. numbers. oil prices settled slightly higher today in new york, rising $0.13 cents to nearly $93 a barrel. but as tonight's commentator points out, just a few short years ago, everyone thought tight supplies would push oil prices through the roof. here's todd buchholz, author of "rush: why you need and love the rat race." >> what ever happened to "peak oil?" just a few years ago experts assured us the earth was hollow, and we'd be running out of oil and natural gas. now the price of natural gas has collapsed by 75% thanks to the fracking revolution.
and this revolution is creating hundreds of thousands of new jobs in hard-hit, hard-hat states like ohio and pennsylvania. was this magic? no, it was the work of men, women, and markets. as the price of oil rose, reaching $147 a barrel in 2008, engineers dug deeper to find more resources. for the first time since terry bradshaw's days with the steelers, a new steel mill is being built in youngstown, ohio. why? to make tubes for the energy industry. u.s. steel spent $100 million to upgrade a mill in lorain, ohio. in 1995 bruce springsteen lamented shuttered steel mills in his song youngstown. 30 years back in 1982 billy joel sang the sad, poignant tune allentown. on his seven-inch single, he wailed that we're living here in allentown, they never taught us what was real iron, and coke, and chromium steel, and we're waiting here in allentown. someday, billy joel might want
to spin his 45 r.p.m. record in reverse. i'm todd buchholz. >> tom: that's "nightly business report" for wednesday, february 27. have a great evening everyone, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.